Editorial, Jan 31: Another 20 cents’ worth on Kodak

31/01/2012

Good afternoon,

As an ex-Kodak employee and keen industry observer, I’d like to add my 20 cents’ worth to the plethora of pontification on why Kodak is crook:

First, I don’t believe the company has made one single correct decision since then-CEO George Fisher chose in the ’90s to sink $3 billion into developing film and paper manufacturing in China, on the arrogant reasoning that the ‘third world’ would be happy with cheap and cheerful little film cameras while richer countries were embracing digital technology. Collateral damage for that decision was the Australian manufacturing plant.

The opportunity cost of squandering that $3 billion literally betting Kodak on success in China rather than, say, developing and marketing the best digital cameras or imaging sensors in the market has, I believe, led the company to its current problems. (I wonder what wunderkind George is up to now?)

When a company declines – as Eastman Kodak started to do under Mr Fisher – it’s a slippery slope. Wise people (think of Ziggy Switkowski, for instance) move away from slippery slopes if they can.

There are no doubt some talented business leaders with the vision, intelligence and courage to take an ailing, ageing corporation like Kodak and turn it around. People forget that Apple was in grave trouble prior to the iPod, for instance. But why would someone with those kinds of rare gifts want to work for Kodak when there are so many more exciting and lucrative opportunities for the best and brightest among growing organisations?

Finally, Kodak has for many years – probably many decades – had a pathological inability to be honest with itself – let alone the rest of the world. As late as last November the current impeccably-suited and exquisitely-coiffed CEO was talking about his ‘high degree of confidence’ in executing a plan to make Kodak a ‘self-standing digital company by the end of 2012’.

Was he lying then, or was he merely deluded? Whatever the case, it would be good to see the last of him real soon.

But at the end of the day, while it would be a shame not to have Kodak batteries or digital frames or cameras in the marketplace, it would hardly signal the end of photo retailing as we know it. (And given the brand still has considerable cachet, it’s also unlikely.)

Far more serious for the industry would be Kodak paper and chemistry disappearing. It would dramatically reduce choice (especially for professional media), and leave Fujifilm, no friend to the dedicated photo store in recent years, with even more market power.

Even Fujifilm customers benefit from Kodak paper and chemistry being available, as it provides an alternative, a little bit of negotiating leverage.

Paper and chemistry manufacture has always been a profit centre for Kodak – not as lucrative as film, sure, but a decent and consistent earner, nonetheless. Ironically, Kodak has taken pains not to highlight this, as it wants to present tself as scoring goals in digital technology, rather than being propped up by what it does best.

As Indendent Photo’s Stuart Holmes points out in our lead story, silver halide media has proven remarkably resilient. My money is on Kodak paper and chemistry being manufactured for many years to come. Whoever eventually owns the manufacturing plants and does the distribution is anybody’s guess, and largely irrelevant to the customer, but the products will, I’m sure, continue to be available so long as demand exists. Why would you kill off one of your few remaining cash cows?